Twitter dishes tantalizing tidbits in IPO treatise

Twitter Inc.'s initial public offering documents suggested a valuation of $12.8 billion for the microblogging service, underscoring the seven-year rise of a still unprofitable company that has helped revolutionize how people share information.Bloomberg News

Associated Press

SAN FRANCISCO -- Twitter, a privately held company built on blurbs, has finally laid itself bare in documents that read more like a treatise than a tweet.

The roughly 800-page filing Twitter Inc. released late Thursday on its way to an eagerly anticipated IPO contains tantalizing tidbits about its growth and its attempts to make money from its influential short messaging service.

The suspense surrounding Twitter's IPO was heightened by the company's decision to take advantage of a law passed last year that allows companies with less than $1 billion in annual revenue to keep their IPO documents under seal until management is ready to make formal presentations to investors.

With Thursday's lifting of the veil, Twitter can start pitching investors during a so-called "road show" as early as Oct. 24. The San Francisco company's stock could begin trading under the ticker symbol "TWTR" before Thanksgiving.

Here are five key details revealed in Twitter's tome:

--TWITTER'S GOT GROWTH TO GET EXCITED ABOUT

After Twitter co-founder Jack Dorsey sent out the first tweet in March 2006, the company didn't even try to make money for its few years. Instead, management focused on attracting more users and making the service more reliable.

Twitter's patient approach is paying off. Since former Google executive Dick Costolo became Twitter's CEO in 2010, the company's annual revenue has soared from $28 million to $317 million last year. Through the first half of this year, Twitter's revenue totaled $254 million, more than doubling from last year. If Twitter maintains that growth pace through the second half, the company's revenue will surpass $656 million this year.

Twitter gets 87 percent of its revenue from advertising. The rest comes from licensing agreements that give other companies better access to the flow of activity on its service.

Meanwhile, Twitter ended June with 218 million users, up from 30 million in early 2010. More than three-quarters of those users, or 169 million people, are located outside the U.S. Twitter is growing fastest in Argentina, France, Japan, Russia, Saudi Arabia and South Africa.

--BUT THE COMPANY ISN'T PROFITABLE

It takes more than cultural heft to build a business, as Twitter is learning. The company has suffered uninterrupted losses of $419 million since its inception. Twitter can afford the losses because it has raised $759 million from investors. The company still had $375 million in the bank at the end of June and hopes to raise at least $1 billion more in its IPO.

But Wall Street won't tolerate losses for long, and it may be a while before Twitter turns a profit.

Twitter's losses widened during the first half of this year to $69 million, up from $49 million in the same period last year. In contrast, both Facebook and LinkedIn were profitable when they went public.

--COMING UP... MORE ADS

To make money, Twitter will likely get more aggressive about showing ads. In the three months ending in June, Twitter generated revenue of $139 million, or an average of just 64 cents per user. In contrast, Facebook generated second-quarter revenue of nearly $1.2 billion, or an average of $1.58 per user, while LinkedIn posted revenue of $364 million, or an average of $1.53 per user.

As Twitter cranks up its marketing machine, it runs the risk of alienating an audience accustomed to seeing relatively few ads in their news feeds. Beyond the U.S., Twitter is gearing to expand its advertising efforts in Australia, Brazil, Canada, Japan and the United Kingdom.

--TWITTER'S MORE "MOBILE" THAN FACEBOOK

Twitter appears tailor-made for an age of increasing reliance on smartphones and tablet computers. Three-fourths of Twitter's users already use the service on mobile gadgets. Perhaps more important to investors, the company sells 65 percent of its ads on smartphones and tablets. Facebook gets 41 percent of its ad revenue from mobile devices.

--ITS MARKET VALUE COULD BE AS HIGH AS $20 BILLION

Twitter hasn't set a price target for its IPO yet, but its documents contain some clues about its recent market value. The company's stock last sold in a privately arranged swap nine months ago at $17 per share. That deal implied Twitter had a market value of $10 billion to $11 billion at the time. Last month, Twitter priced some of its employee stock options at $20.62, based on a third-party appraisal of the company's value.

Some analysts predict Twitter will seek $28 to $30 per share in its IPO. If those projections pan out, Twitter will have a market value of $17 billion to $20 billion, including stock options and restricted stock likely to be converted into common shares after the IPO. Facebook made its stock market debut with a market value of more than $100 billion, but its stock plummeted before making resounding comeback this year.

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